Bloomberg News

Euro May Surpass 105 Yen on Fibonacci: Technical Analysis

May 22, 2012

The euro may rebound to the highest level in almost three weeks against the yen, according to Bank of America Merrill Lynch, citing trading patterns.

“In the short term, the euro has scope to strengthen beyond the 105 yen level, near the 50 percent retracement from its high in March,” said Tomoko Fujii, a Tokyo-based senior foreign-exchange strategist at Bank of America, without specifying the time frame. She cited Fibonacci analysis, which is based on the theory that prices rise or fall by certain percentages after reaching a high or low.

The 50 percent Fibonacci retracement of the euro’s decline from its March 21 high of 111.44 yen to the low of 100.21 yen on May 18 is at 105.82, according to data compiled by Bloomberg. That would be the strongest level since May 3.

Europe’s common currency has fallen more than 8 percent versus its Japanese counterpart since the end of March amid concern the region’s debt crisis is worsening.

The euro slid 0.1 percent to 101.32 yen as of 8:39 a.m. in Tokyo from yesterday’s close in New York.

“The euro is looking oversold,” said Fujii. Its 14-day relative strength index against the Japanese currency was at 31, near the 30 level some traders see as signaling an asset may reverse declines, after dropping to 23 on May 17.

In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.

To contact the reporters on this story: Shigeki Nozawa in Tokyo at snozawa1@bloomberg.net; Mariko Ishikawa in Tokyo at mishikawa9@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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